Separation of FANG

Netflix had a great earnings report Tuesday afternoon and it shot up after the Bell on Tuesday and went straight down after that. It opened Wednesday morning at $380, dipped down to 356 before finishing around 365. It went further down on Thursday and even further on Friday as Disney hit a new 52 week high that is near it's all time high based on belief that Disney will take market share from Netflix moving forward. Alphabet and Amazon traded down but for the most part Alphabet and Facebook finished the week flat while Netflix and Amazon experienced more negative effects due to their high valuation.

Trading Alphabet (GOOGL) options were interesting on Friday as it looked very similar to the prior Friday. Alphabet opened up and went up to 1121 by 10:05am before going down to 1098. It went back up to 1110 and back down to 1097 before finishing the day at 1105. It didn't have the big late day run like last Friday and is why I say that you can't trade expecting a huge Friday afternoon movement or you will get burned more times than not.

Options will be very expensive for Amazon and Alphabet because they report earnings after the bell on Thursday. Like Netflix  their earnings should be great and they will go up huge and sell off the whole day on Friday.

I did take advantage of the sold off Friday position of Tesla to buy a 360 Call for next week when it was at 354. I hope to get a nice move up on Monday or I will be selling quickly.

On Tuesday Verizon will report third quarter earnings before the market opens and as usual it will be great and benefit from not having any tariff exposure or declining media business because they are not trying to be in a low profit market like AT&T which reports Wednesday. It would be nice if AT&T has something good to report. Either way Verizon should be up more which is never the case as AT&T drags Verizon down with it. I would like to see Verizon and AT&T to act like PayPal and Ebay as PayPal had great earnings report and Ebay went in the opposite direction on PayPal highs.

Boeing reports earnings Wednesday morning and they should be excellent as long as they don't have anything to say about tariffs. As with almost every company that has reported earnings, I find that if they have great earnings and go up big, they will sell off that next trading session. If the market does not like the earnings, the shares will go further down in the next couple of market sessions. Either way it appears best to buy Put options in the first couple of minutes after the market opens after earnings are reported. Based on that stance it sounds like we are in a bear market. I don't believe that is the case as positive market movement is based on less than 30 days in a year. That is what history says  but the down days extend into multiple sessions while positive movement occurs in a day and doesn't appear to move as much as the sum of the down days. 

Netflix and Chilled, Interest Rates and Market Correction

Netflix reported a blow out 3rd quarter Tuesday afternoon. The stock rose as high as $400 before

settling around $385 and then opened Wednesday morning at $380. From there it went down along with FANG. Facebook, Amazon, and Alphabet found a bottom earlier than Netflix. Netflix found it's bottom around 355 before moving up for the afternoon. I like to see if that number will hold, but so far on Thursday is barely hanging on. Alphabet bottomed at 1115 which should be a key point to pay attention to on Thursday.

Today Alphabet opened higher at 1130 and went straight down to 1114 before bouncing up and then retesting that level at which I bought Call Options and it didn't hold as it went down to 1110. Much of the downward movement in stocks is due to the Federal Reserve minutes noting they still expect to raise interest rates 3 more times next year in addition to again in December. Rising interest rates is what Trump expects will kill the economy and he is right.

Higher interest rates cost all businesses more. Businesses finance expansion with the issuance of debt and small businesses may use debt to help with daily cash flow. Start up businesses may utilize debt to help establish themselves. Consumers use loans to purchase vehicles, homes and luxury items. If the businesses are being squeezed and the consumers have less desire to purchase higher end items, everyone loses, not just the housing sector.

The housing sector has extra constrains between higher material cost along with higher rates consumers have to pay for the mortgage loans. I believe the ultimate problem is the housing sector got fat and greedy from low interest rates for so long. Because interest rates were so low, people wanted larger houses that are larger than what they actually need. Where are they building homes for the average family? It isn't in Orlando, Florida.

Moving forward, Americans are going to have some of the largest tax refunds at the beginning of 2019. Housing may benefit some but with higher interest rates, not as much that will make a difference for the long term. People buy cars when they get big tax refunds regardless of the interest rates so I think Ford is positioning themselves to be the best along with Tesla. I think with Ford and Tesla at their 52 week lows they are a value and a growth buy for 2019 and investors will be happy by August of 2019.

Market Update to Trends

The Dow finally hit a new high this past week on strength from Boeing and JP Morgan without help from Apple. Since Boeing was at $337 it has rallied to $372 which is only a few points away from its all time high. JP Morgan rallied within pennies of it's all time high established earlier this year on the back of a strong 10 year Treasury Note rate above 3%. This week everything is going to be tested if the Fed raises the Fed Funds Rate on Wednesday. If that rate goes up, everything will come down for the next day with a reversal happening mid day on Thurday.

It might be surprising that Apple is not participating in the rally especially since they just introduced the most innovative technology to come to wearables with their new watch being FDA approved to perform electrocardiograms. Those who still have a iPhone with a button will probably upgrade in the next few months so Apple's future looks pretty strong and even stronger as everything is funneled to their service business. I see Apple setting up to be a huge long term play although I would never own a Apple product because I feel Samsung is far superior. 

So what is going on with FANG? Facebook, Amazon, Netflix and Alphabet all appear to be in trading patterns for the next couple of weeks. Facebook is floating between 158 and 165 and may trend further down after reporting earnings despite having no debt. Amazon passed a trillion in market cap and came down from there to trade in a range. I feel it is still over priced and we might get something funky from their earnings to show that they are not growing subscribers and earnings slow down. Netflix domination in subscribers will not be affected by other companies trying to take market share as Disney is not close. Alphabet's Google appears to be the beneficiary of problems with Facebook although you would not be able to tell it by the stock price. 

Alphabet (GOOGL) along with FANG is in a trading range. Netflix is trading between 350 and 372 while Alphabet is trading between 1160 and 1195. For the past couple of weeks we have seen Alphabet close around 1190 only to drop 15 to 20 points on Friday and a little further on Monday. Tuesday's have been up and Wednesday's have started down near the low for the week that was established in the last week but moving up for the rest of the day on Wednesday and Thursday only to fall again on Friday. This is almost identical to what happened last year when Alphabet was trading between 918 and 942. Last year it broke out higher 2 weeks before earnings as it passed the prior high and shot higher after the earnings for the 3rd quarter were announced. 

This brings me my next blog as to what happened with the 4th quarter earnings, the first half of 2018 and the Trump policies. 

Tuesday Profit From Rebound

As previously mentioned  the Nasdaq and FANG was down for the past 3 days  They opened up today, but had a pull back that lasted until 10:20am when the tech stocks broke out to the upside. CNBC's Jim Crammer said this morning that it would be led by Facebook and that is what happened as they identified accounts used to manipulate the upcoming midterm elections.

Alphabet (GOOGL) opened up, dropped sharply then moved up to 1237 then dropped below the prior to earnings high of 1221 to 1216 then took off to the upside. It looked like it was going to stall around the morning high then shot past it to 1241. From that point I ended my trade for the day because there was not going to be a predictable direction since everything will pause for Apple's earnings after the market close. Here are the charts for the trade.

Monday Options Profit

More pain came Monday as FANG took another turn down. Facebook got as low as 166.50 which is close enough to the 165 mark that I said it was a screaming buy. Amazon, Alphabet and Netflix continued downward also. I see this continuing a little more as they will retrace to prior earnings highs for Netflix and Alphabet.

I traded options on Alphabet (GOOGL) where I saw it dip down at open, come back near the open price and then continue downward. Here are the charts and how to trade it. The first is the chart showing the 1 minute interval where you find your entry point.

 Next you will see the 5 minute interval chart which determines how long you stay in the trade.

FANG Exposed - Part 5

So far I have said why Facebook and Alphabet are great investments and why I would not invest in Amazon. Now here is my stance on Netflix.

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Everyone loves Netflix! Netflix raised their price a few years ago and they lost membership. They recently increased their membership price and the market did not flinch. Netflix is available on almost every smart device to watch old television shows and new and old movies. Netflix has spent a ton of money on new content and it has helped grow and maintain membership.

All of that sounds good so why wouldn't I be a long term investor of Netflix?

• Price to earnings ratio is too high. To bring the PE Ratio down to 30 means it is trading 5 times higher than it should which would make it's price around $70/share. At that price I would be a buyer.
• Debt to equity is so high as Netflix creates their content by paying from debt issuance. So many other companies have content but don't have the platform. Hopefully it works out for Netflix, but this point brings me to the next.
• Companies with tons of content are looking to create a platform to compete and take market share from Netflix. Disney, AT&T, and everyone else is looking to take Netflix down. The leader to watch for is Disney as they have a ton of content, acquired more with the Fox acquisition and acquired a strong platform in Hulu that came with Fox.

Cord cutting has grown lead by Netflix and their content is top notch. The membership fee for Netflix is reasonable although it is higher than Amazon Prime, but Amazon is separating their services to charge the user more money. The biggest headwind to Netflix is competition, but their biggest advantage is their unlimited world wide growth potential. 

Netflix is great to buy on dips and sell on highs, but I would not be a long term investor of Netflix. A small dip of subscribers could cut the stock price of Netflix in half.

Facebook Loss Means Google Win

• The biggest news Wednesday is what took over the news on Thursday is Facebook's decline in market value. The decline was based on slowing growth and a miss on the number of active users by 20 million. That sounds large if you didn't know that they still has 2.33 billion active users. Regardless Facebook had a huge decline that pushed down technology stocks at the open. Most recovered but Amazon went down in anticipation of their earnings report release after the market close.
• Amazon's earnings sounded like a blow out quarter, but the revenue number missed what analysts expected. It went up, but it wasn't crazy up as in past earning announcements. 
• The winner appeared to be Alphabet (GOOGL) as it opened lower for the 2nd day in a row to break out to a new high. So let's break down the options trade for profit. When it opened, it shot up so it is best to wait for it to come back to where it started since looking at the chart for 1 minute stochastic was at the top and the 5 minute was at the bottom. This is a sign that it will come back to where it started the day around 1264 which it bounced off 2 times just before 10am.  
• 
  
• Final thoughts on Facebook: Facebooks numbers were the best of the FANG stocks as I shared with in my blog this week. Facebook displayed that it is still growing but not at the pace as expected. Mark Zuckerberg shared this previously. Should the stock of Facebook fall to 165, it is a screaming buy. Even if the margins are cut in half, it is still without debt and very high margins. 

FANG Exposed - Part 4

I hope you have a better understanding of the investments that make up FANG after reading my blog. I discussed why Facebook and Alphabet (GOOGL) are buys and now Amazon.

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Jim Crammer coins Amazon as being the death star with the expectation that any business that

Amazon gets into, it dominates. Many think that Amazon has low overhead because it doesn't have any storefronts, then they bought Whole Foods. Most people don't understand that Amazon has many warehouses and many people working at these local locations.

I believe Amazon is working smarter when they partner up with stores like Khols and Best Buy instead of trying to buy more physical locations. Amazon's best location is their website which until their most recent Amazon Prime Day has worked without a hiccup. I see their biggest strength is also their biggest liability which is the Amazon Prime subscription. The market did not see a problem with them raising the cost of Amazon Primer Membership while other companies have used as a point of attack.

EBay and Walmart constantly attack the membership price of Amazon Prime as they provide free shipping with low minimums without paying a membership fee. Walmart has many locations nearby where you may return or exchange merchandise and Amazon does not.

Amazon's web services is a huge money maker, but as the world gets more technologically advanced, there will be more choices to use including Google and Microsoft which are taking market share. Amazon is great for business, but where it enters, it creates opportunity for others to do it better for less.

Speaking of less, Amazon might be attractive if it were trading around $180/share which is 100 times less than it currently trades as indicated by it's PE Ratio. It is a growing company and is why it still has 56% institutional ownership, but it might be considered a value company if it were trading at a more reasonable share price. Amazon's earnings per share and return on equity look nice, but company debt flares a red flag when comparing to other Facebook and Google.

The last problem is when Amazon produces their earnings and everyone sees the growth, does the stock price need to reflect an increase from this level?

Alphabet (GOOGL) Day Trade to Profit

• Another day when Alphabet (GOOGL) opens down big creates great opportunities to profit from buying Call Options. Yesterday Alphabet closed at 1258 and today it opened at 1249 where it bounced from yesterday. It went straight up to 1267 at 10am before pulling back some.
  
• You could have bought another call option at 11am and if you had the guts to hold it until the end of the day you would be quite happy. There was too many opportunities for it to falter that this would not be a good trade. 
• Facebook reported earnings after the market close today where it beat on earnings but was driven down because they reported active users increase to 2.33 billion instead of 2.35 billion. This drove everything down after hours and might create another buying opportunity for Alphabet tomorrow morning. Amazon broke to a new high today and reports earnings tomorrow afternoon. We might be due for more fake pin action on Friday.

FANG Exposed - Part 3

Yesterday I broke down Facebook and today I will go through Alphabet (GOOGL).

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Where Facebook is on every smart device, the same can be said true for Google. Google owns Android which is on 70% of all phones and has a strong presence on Apple devices also. Google provides free services through apps ranging from maps to translation and has it's assistant built into everything. Google owns the best speaker not because of the sound. Google Home is the best speaker because of the integration of Google's Voice Assistant.

Google also owns Waymo which is projected to be huge by itself. It also owns Nest which has the best thermostat and now video door bell. Most importantly Google owns YouTube which is it's best performing section next to search. To double down on YouTube, Google owns YouTube TV which takes advantage of the growing space of cord cutters.

Based on all of this, you probably understand why institutional ownership is the highest for Google among the members of FANG. When looking at the numbers, the Earnings Per Share scream buy coupled with the low amount of debt the company carries.

Google partners with a number of companies including the largest retailer in the United States Walmart. Do they have a monopoly? I don't know, but can you make it a day without searching Google or using a Google product? I can't either, so it must be a buy.

FANG Exposed - Part 2

Which did you pick? Was it A or B?

What is the order of FANG on the chart that I shared yesterday?

Here is the chart with the companies listed above:

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

So now I will address each of them for the next couple of days starting with Facebook. No matter how many people say they are not using Facebook anymore, there are still 10 times more that are using it. That number might be small, but if you do not use Facebook, do you use Instagram or What's App?

I don't believe that Facebook has really begun to try to monetize Instagram or What's App. Companies pay for advertising with Facebook because they allow you to market your service and products specifically to demographics that you desire. Therefore I believe Facebook has a lot of room for growth in sales numbers.

Facebook has the best Return on Assets of the FANG members and it looks even better when it doesn't have any debt. Facebook is growing and without fines and regulation, it will continue to grow. Even with an increase to fines or regulation, Facebook's financials can absorb it and continue to grow.

The drawback of Facebook which might be considered a strength is it is a service company with no physical products. Instead Facebook may be found everywhere from phones, tablets, televisions, computers and a variety of smart devices. 

FANG Exposed - Part 1

Jim Crammer coined the acronym FANG for Facebook, Amazon, Netflix and Google (now Alphabet) and many follow these stocks for gains when the rest of the market stalls. I find it funny when these companies are similar but there financials are different. So let's take some fundamental numbers of them and you tell me which one makes sense based on the numbers to invest:

	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Tune in tomorrow to find out which is which, but which one would you invest your money into?

To me, A is the winner with B closely behind. I remember Crammer mentioning that he likes companies with a PEG (Price to Earnings Growth) over 2, but his favorite company Apple is below that. I feel that a number below 2 might be better because if your PE ratio is overextended, it doesn't matter what your growth number is because your PEG will still be high.

When I was in school, I was told that you want companies that have a PE ratio below 10. These days those only exist in high dividend companies that don't have growth. Dividend are great, but growth is how you build wealth. Therefore PE ratio along with the Institutional Ownership would eliminate number 3.

The bottom numbers are interesting and exciting. Company A has no long term debt where company C and D appear to be leveraged heavily. Would Company C and D be in this group if they didn't have so much debt?

If you take out the first line, Company A beats the rest of FANG. Ultimately you invest in shares of companies to share their earning power, so Earnings Per Share puts Company B far ahead of the rest.

Based on these numbers, which one would you take?